Innovative ideas need diverse funding mechanisms. Looking beyond the ICO, there are lots of Web 3.0 funding options that expand opportunities and will encourage business diversity.
As an early stage investor, I’ve met too many entrepreneurs who struggle to launch because they have a good idea but see vc funding as the only mechanism to help them build. This mindset is limiting — it restricts the scope of projects to only those with $B+ scale potential.
Too many startups today are chasing difficult but obvious ideas like “the new Yelp”, “better marketing automation”, and “ai for X industry” so they can raise venture capital. Developers look for potential to scale instead of real opportunities with revenue potential. Bootstrapping is always an option but even it could use some new approaches.
In 2017, we saw the rise of the ICO which shook up the idea of early project fundraising. It is imperfect and an attractive funding mechanism for scammers, but it’s rise in popularity helped create a new conversation about project funding in Web 3.0. ICOs seem here to stay, but like venture capital, it isn’t the right funding path for the majority of projects.
Developers and startups have realized there is still a gap in funding early work. Fortunately, there are a number of mechanisms being tested to help builders find capital to build what’s next.
Fund your project without fundraising or an ICO
Bounties — Open source contributions are in demand and want to compensation developers for their work. Platforms like Gitcoin, a marketplace to match open ethereum bounties with developers, make bounties easier to find. Join their network to see paid contributions from projects like Decentraland, Ethereum Network, LivePeer and Gitcoin itself. They’ve hosted 235k of bounties on the site so far. Bounties range from $10 to $10,000+.
Grants — Apply for a grant to fund your project if it relates to the goals of a protocol foundation. The Ethereum Community Foundation has put together an extensive list of grant opportunities across different networks like Aragon, Blockstack, and IPFS. Full list here.
Decentralized network services — Build software to services in a new network. For example, Steem.it is a content network like Reddit, powered by the decentralized network Steem. Developers have created upvoting bots that publishers pay to promote their posts in the network. Steemit has paid out $40M in rewards itself, which does not include the bot payouts that work as a parallel market.
Generalized mining — New protocols are emerging that provide economic incentives for supplying compute to validate their networks. Generalized mining focuses on building software for competitive advantage, and does not rely solely on specific hardware. Proof of stake networks like Livepeer and Tezos have validator networks that reward participants for being nodes in the network or staking in the network.
Venture tokens — Well funded layer 1 protocols are getting into the venture business by providing venture capital in the form of tokens if you are supporting the growth of their ecosystem. The diligence process may be similar to traditional VC, but the expectations on ROI is more about “growing the ecosystem” then just return on capital invested. The EOS Block.one fund has 1B dedicated to this category, but will be deployed by a number of different firms, including $325M managed by Galaxy in New York City.
We need new innovative funding mechanisms just as much as we need new business ideas. Whether you are building in the blockchain ecosystem or just looking to fund your project with the proceeds, these sources can generate runway for your ideas. Best part, you get to keep ownership.
I am excited about creating more opportunities for entrepreneurs. If you’ve seen other new Web 3.0 funding mechanisms, please share in the comments blow. If you want to learn about more resources like those mentioned above, drop a line in the comments or reach out @br_ttany.